Chinese trademark holder says Tesla must pay him $3.9 million

Electric automaker Tesla has become embroiled in a trademark dispute in China, where a man who registered rights to the Tesla name in 2006 is insisting that the car company stop using its branding and pay him for infringement.

Zhan Baosheng, a 36-year-old man who runs a skin care company called Cengceng Inc, sued Tesla on July 3, asking that the court make the car company "shut its showrooms, service centers, and supercharging facilities [in China]; stop all sales and marketing activities in the country; and pay [Zhan] 23.9 million yuan ($3.9 million) in compensation,” according to Bloomberg.

This is only the latest in an ongoing dispute between Tesla and Zhan. Although Tesla was founded three years prior, Zhan filed his trademark application “for auto-related purposes" in 2006, Bloomberg says. Tesla first came to Zhan in 2012 and offered to pay $50,000 for the trademark; when Zhan refused, Tesla offered two million yuan, or about $323,000. When Zhan refused a second time, Tesla went to a Chinese regulator, who ruled that Zhan’s trademarks were invalid, Bloomberg reports. Zhan’s July 3 lawsuit is an appeal of that decision.

Zhan owns the Tesla.cn domain name and has it redirect to his Twitter account. On June 24, he wrote, "hi, I am the owner of TESLA trademark in China. The trademark is still in my hand, Tesla Motors is lying.” Tesla, for its part, asserts that Chinese authorities have ruled in Tesla’s favor already and that Zhan is the one who is stealing the trademark. “There can be no legitimate dispute that we used these trademarks first as we were the ones that created them,” Tesla spokesman Simon Sproule told Bloomberg. "Zhan’s is a cynical attempt to steal a property that we spent time and effort creating, and put into use long before Zhan’s crass attempts to steal them from us.”

Zhan also owns trademarks for the names Loremo, which happens to be the name of a German automaker founded in 2000; Cobasys, which is the name of a US company that supplies automotive batteries and battery parts; and Cuill, a 2007 search engine startup that has since crumbled. The practice of watching foreign startups and registering trademarks based on their names or products as soon as those companies might try to expand is considered “trademark trolling” in many circles. Whether the work of trolls or not, trademark disputes have cost companies, like Apple, a lot of money. In 2012, Apple paid $60 million to a China-based company called Proview for the iPad trademark.